The provisional consumer prices for November fell 0.2 percent month-on-month and rose 1.2 percent year-over-year, 0.1 percent less than the consensus.

The monthly HICP fell 0.2 percent on the month, steady from October's reading. At 1.1 percent, the annual rate, down from 1.3 percent in October, is below the ECB's 2 percent target.

November's steady annual CPI rate was mainly due the decline in prices of transport (from 2.0 percent to 0.8 percent), unprocessed food (from 1.9 percent to 1.4 percent), recreation and personal care (from 3.3 percent to 2.9 percent), and energy (from minus 0.5 percent to minus 3.3 percent). This offset the rise in the prices of non-regulated energy products (from minus 4.9 percent to minus 4.4 percent).

Core inflation was 1.8 percent in November, down from 1.9 percent in October. The prices of groceries rose 0.4 percent on the month and 1.9 percent on the year, down from 2.1 percent in October.

This latest update puts the RPI at minus 24 and RPI-P at 4, meaning that the real economy is still performing within market expectations.

Inflation expected at 0.0 percent on the month and 1.3 percent on year in November versus minus 0.3 percent and 1.2 percent in October.

The consumer price index (CPI) is a measure of the average price level of a fixed basket of goods and services purchased by consumers. Monthly and annual changes in the CPI provide widely used measures of inflation. A provisional estimate, with limited detail, is released about two weeks before the final data are reported.

The consumer price index is the most widely followed indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact. In countries such as the Italy where monetary policy decisions rest on the central bank's inflation target, the rate of inflation directly affects all interest rates charged to business and the consumer. As a member of the European Monetary Union, Italy's interest rates are set by the European Central Bank.

Italy like other EMU countries has both a national CPI and a harmonized index of consumer prices (HICP). Components and weights within the national CPI vary from other countries, reflecting national idiosyncrasies. The core CPI, which excludes fresh food, is usually the preferred indicator of short-term inflation pressures.

Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets - and your investments. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.

By tracking inflation, whether high or low, rising or falling, investors can anticipate how different types of investments will perform. Over the long run, the bond market will rally (fall) when increases in the CPI are small (large). The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.